Corporate Presentation Mar’16 - Lakshmi Vilas Bank Corporate Presentation Mar2016.pdf · Bank or...

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Corporate Presentation – Mar’16

Revised as on 26/10/2016

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Disclaimer

This presentation has been prepared by The Lakshmi Vilas Bank Limited (the “Bank”) solely for information purposes without regard to any specific objectives, financial situations or informational needs of any particular person. This presentation should not be construed as legal, tax, investment or other advice. This presentation may not be copied, distributed or disseminated, directly or indirectly, in any manner. Furthermore, no person is authorized to give any information or make any representation which is not contained in, or is inconsistent with, this presentation. Any such extraneous or inconsistent information or representation, if given or made, should not be relied upon as having been authorized by or on behalf of the Bank. The distribution of this presentation in certain jurisdictions may be restricted by law. Accordingly, any persons in possession of this presentation should inform themselves about and observe any such restrictions. Furthermore, by reviewing this presentation, you agree to be bound by the trailing restrictions regarding the information disclosed in these materials. This presentation contains statements that constitute forward-looking statements. These statements include descriptions regarding the intent, belief or current expectations of the Bank or its directors and officers with respect to the results of operations and financial condition of the Bank. These statements can be recognized by the use of words such as “expects,” “plans,” “will,” “estimates,” “projects,” or other words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those specified in such forward-looking statements as a result of various factors and assumptions. The risks and uncertainties relating to these statements include, but are not limited to, (i) fluctuations in earnings, (ii) the Bank’s ability to manage growth, (iii) competition, (iv) (v) government policies and regulations, and (vi) political, economic, legal and social conditions in India. The Bank does not undertake any obligation to revise or update any forward-looking statement that may be made from time to time by or on behalf of the Bank. Given these risks, uncertainties and other factors, viewers of this presentation are cautioned not to place undue reliance on these forward-looking statements. The information contained in this presentation is only current as of its date and has not been independently verified. The Bank may alter, modify or otherwise change in any manner the contents of this presentation, without obligation to notify any person of such revision or changes. No representation, warranty, guarantee or undertaking, express or implied, is or will be made as to, and no reliance should be placed on, the accuracy, completeness, correctness or fairness of the information, estimates, projections and opinions contained in this presentation. None of the Bank or any of its affiliates, advisers or representatives accept any liability whatsoever for any loss howsoever arising from any information presented or contained in this presentation. Please note that the past performance of the Bank is not, and should not be considered as, indicative of future results. Potential investors must make their own assessment of the relevance, accuracy and adequacy of the information contained in this presentation and must make such independent investigation as they may consider necessary or appropriate for such purpose. Such information and opinions are in all events not current after the date of this presentation. This presentation does not constitute or form part of and should not be construed as, directly or indirectly, any offer or invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of the Bank by any person in any jurisdiction, including in India or the United States, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any investment decision or any contract or commitment therefore. This presentation is not a prospectus, a statement in lieu of a prospectus, an offering circular, an advertisement or an offer document under the Companies Act, 2013, as amended, the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended, or any other applicable law in India.

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Table of Contents

Bank overview 1

Strong brand legacy developed over 90 years of existence 2

Well diversified management team backed by rich financial services experience 3

Strategic emphasis on enhancing CASA growth 4

Focus on fee-based products to drive other income 5

Modification in IT architecture towards automation and enhanced customer experience 6

Customer segmented asset strategy to provide fillip to growth 7

Strengthening existing asset monitoring and lending policy for improved asset quality 8

Financials 9

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BANK OVERVIEW

4 4

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Lakshmi Vilas Bank: A private sector Bank in its transformational Journey

Overview

Founded over 8 decades ago in 1926 under leadership of Shri V. S.

N. Ramalinga Chettiar, LVB has a strong presence in Southern India

Network of 460 Branches, 7 extension counters and 910 ATM’s

March 16

Business Size of Rs.452,499 Mn with an excellent CAGR of 17 % in

the last 5 years

Predominantly a Retail / SME focused Bank – ~ 57% of total

business is from these segments

Deposits and Advances of the bank grew at a CAGR of 16% and

18% respectively over the last 5 years

During FY16, the bank registered a Operating profit of Rs.4,071

Mn and PAT of Rs.1,802 Mn.

Operating Profit and PAT growing at a CAGR of 15% and 16%

respectively over the last 5 years.

Over 2.71 million Customer accounts

Our Vision

To be a sound and dynamic banking entity providing financial services of excellence with pan-India presence

Our Mission

To develop a range of quality financial services and products to create value for customers, shareholders and the society; to motivate people to achieve excellence in performance leading to sustained profitable growth and build a vibrant organization.

With continuous investments in technology, all of our services are

offered on a robust technologically advanced platform.

We take special pride in the fact that we are able to offer

personalized services drawing inspiration from our rich heritage,

even as we have moved over to the latest in technology

We benchmark our operating standards continuously with the

best practices in the banking industry, so as to ensure that our

customers always receive services with high level of satisfaction.

We recognize that we are truly in the business of bringing

prosperity to all our stakeholders, Demonstrate high corporate

governance standards that protects and balances stakeholder

interests in the journey of moving towards short and long term

business goals and seek continuously to live up to the motto ‘life

smiles where LVB serves’.

Our Vision and Mission

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Gradual evolution from an old generation private sector bank to a new-age professionally run financial platform

Transition from a South India focused corporate lender to a national focus modern bank with diversified focus on retail, SME, Corporate and fee-based products

1926 Incorporate in

Karur

1958 Granted banking license from RBI

Becomes Scheduled Commercial Bank

1961-74 Branch expansion through

acquisition1

Expanded beyond TN to neighbouring states and

Metros

1976 Attained the status of

Authorized Forex Dealer

2000 Lists on NSE

1997 Opened 200th branch in

Tirupathy Opened 1st ATM in

Andheri

2006 Implemented Core Banking Solution

2008 Launched Internet Banking

2011 Awarded Best Bank

among small Banks for “Electronic Payment

Systems” from IDRBT2

2016 460 Branches

916 ATMs Launched mobile app

Launched multi function E-lounge

2015 Launched CROWN, boutique banking for HNI customers

2014 Moved HQ to Chennai to change the image from a

South-based bank to a new-age professionally run

institution

Focus on South India

Focus on Tamil Nadu Focus on product diversification

Transition to a new age financial platform

1 – Acquired 9 banks namely Thirukattupalli Bank, Salem Gugai Sri Krishna Bank, Sri Nadiambal Bank, Kattuputhur Bank, Trichy Vysya Bank, Kannivadi Bank, Salem National Bank, Salem Sri Ramasamy Bank, and Karur Mercantile Bank;

2 – Institute for Development and Research in Banking Technology

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Sustained improvement in financial metrics with strong focus on qualitative growth (1/2)

Yield on Advances and Cost of Deposits

13.6% 13.0% 13.2% 12.8% 12.2%

8.6% 9.0% 8.7% 8.6% 8.2%

FY12 FY13 FY14 FY15 FY16

Yield on Advances Cost of Deposit

Stable NIMs and strong growth in NII

3,712 3,920 4,860 5,266

6,453

2.9% 2.6%

2.9% 2.7% 2.8%


NII (INR Mn) NIM

Consistent Fee Income Profile

669 798

980

1,194

1,471 0.5% 0.5% 0.5% 0.5% 0.6%


Fee Income (INR Mn) Fee Inc / Avg Assets

Stable Operating Expense Ratios Improving Asset Quality Profitability on Track to Recovery

55.5% 57.4% 56.1% 53.6% 57.1%

2.0% 2.0% 2.0% 2.0% 2.0%


Cost to Income Ratio Opex / Avg Assets

3.0%

3.9% 4.2%

2.8%

2.0% 1.7%

2.4%

3.4%

1.9%

1.2%

0.4% 0.5%

1.2%

0.7% 0.7%


GNPA NPA Provision / Avg Assets

13%

10%

6.2%

10.8% 11.7%

0.7% 0.5%

0.3%

0.6% 0.7%


RoE RoA

Source: Company Annual Reports

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Sustained improvement in financial metrics with strong focus on qualitative growth (2/2)

Healthy Growth in Business Deposits Mix Advances Mix

Aggressive Investment in Branch Network Improvement in Employee Productivity Sustained branch productivity with

aggressive expansion

Source: Company Annual Reports Business defined as summation of Net Advances and Deposits

141 156

186

220

254

102 117 129

164

196


Deposits (INR Bn) Advances (INR Bn)

4 year CAGR

15.9% 17.8%

5.1% 9.8%

85.1%

6.4% 10.9%

82.6%

Demand Deposits Savings Deposits Term Deposits

FY12 FY16

28.2%

15.5%

13.3%

43.0%

29.4%

18.5% 12.5%

39.6%

FY12 FY16

MSME & Mid Commerical Agri/Rural Retail Corporate

290 291

361 400

460 3,054 3,149 3,292 3,459 3,565


Branches Employees

80 87

96 111

126


Business/Employee (Mn)

838 939

872 958 980


Business/Branch (Mn)

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LVB 2.0 | Strong brand legacy to usher in a new era of growth

FY16

Number of Branches

FY20E

Total Assets (INR Bn)

Net Interest Margins (%)

Cost/Income Ratio

Gross NPA

Return on Assets

Return on Equity

460

287

2.8%

57.1%

2.0%

0.7%

11.7%

1,000

650

3.3%

48.7%

1.6%

1.2%

18.3%

LVB 2.0

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Building blocks for strategic plan

Team

Customer Segmentation

Focus to augment skills and capabilities

Strategic additions to fill gaps

Strengthening HR practices

Sustainable Growth

CASA

Credit

Granular customer segmentation for focused strategies

Retail : Initial focus on mortgages and vehicles; other products in phased manner

MSME: Regional focus

Strengthen credit and risk functions

Separation of client acquisition from credit appraisal

Centralization of wholesale credit

Target 10 year CAGR of 20-25%

Initial focus on deepening presence in focus geographies

Building brand for phased expansions in contiguous markets for wider presence

Focus on increasing CASA share through branch specific initiatives

Strong early progress

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Key Investment Highlights

Gradual evolution from an old generation private sector bank to a new-age professionally run financial platform

Conscious synergies derived from provision of augmented financial services to the technologically advanced youth

Strong brand legacy developed over 90 years of existence

Experienced management team with diversified experience encompassing various branches of financial services

Defined verticals for core competency across the organization; with change in hiring culture towards a professionally run bank

Well diversified management team backed by rich financial services experience

Targeted efforts across geographies to boost low cost CASA deposits

Recent branch expansion and promotions expected to show colour and result in sustained CASA growth

Strategic emphasis on enhancing CASA growth

Defined targets for Third Party Products to provide fillip to fee-based income from 11% in 2016 to 25% in 2026

Focus on ensuring magnified presence across channels through innovative products and strategic associations

Focus on fee-based products to drive other income

Customer segmentation to fulfill differentiated customer requirements for effective financial product delivery

Division of lending functions for streamlined operations and lower Turnaround Time

Customer segmented asset strategy to provide fillip to growth

Centralization of the loan monitoring process across lending products for strengthened asset quality

Formation of a specialized Recovery Group at the Corporate Office for all product classes; with revamping of lending policy

Strengthening existing asset monitoring and lending policy for improved asset quality

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STRONG BRAND LEGACY DEVELOPED OVER 90 YEARS OF EXISTENCE

12

12

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Gradual evolution from an old generation private sector bank to a new-age professionally run financial platform…

Transition from a South India focused corporate lender to a national focus modern bank with diversified focus on retail, SME, Corporate and fee-based products

1926 Incorporate in

Karur

1958 Granted banking license from RBI

Becomes Scheduled Commercial Bank

1961-74 Branch expansion through

acquisition1

Expanded beyond TN to neighbouring states and

Metros

1976 Attained the status of

Authorized Forex Dealer

2000 Lists on NSE

1997 Opened 200th branch in

Tirupathy Opened 1st ATM in

Andheri

2006 Implemented Core Banking Solution

2008 Launched Internet Banking

2011 Awarded Best Bank

among small Banks for “Electronic Payment

Systems” from IDRBT2

2016 460 Branches

916 ATMs Launched mobile app

Launched multi-function E-lounge

2015 Launched CROWN, boutique banking for HNI customers

2014 Moved HQ to Chennai to change the image from a

South-based bank to a new-age professionally run

institution

Focus on South India

Focus on Tamil Nadu Focus on product diversification

Transition to a new age financial platform

1 – Acquired 9 banks namely Thirukattupalli Bank, Salem Gugai Sri Krishna Bank, Sri Nadiambal Bank, Kattuputhur Bank, Trichy Vysya Bank, Kannivadi Bank, Salem National Bank, Salem Sri Ramasamy Bank, and Karur Mercantile Bank;

2 – Institute for Development and Research in Banking Technology

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…with deep concentration in South India with significant growth potential

Facts as of March 2016; 1 – Mobile banking transactions from app launch on January 28, 2016 to March 31, 2016

2 – Share of the State’s outstanding credit from Scheduled commercial banks as of March 2015

460 Branches

916 ATMs

2.7Mn Customers

3,565 Employees

15 States

INR 443mn Mobile Banking

Transactions1

INR 29bn Internet Banking

Transactions

11 Regional Offices

1.5mn Saving Accounts

70,000 Current Accounts

Andhra Pradesh & Telangana (13.4% of LVB’s advances) PSU Banks’ Market Share2: 75.4%

LVB Market Share2: 0.4%

Tamil Nadu (45.8% of LVB’s advances) PSU Banks’ Market Share2: 67.6%


Karnataka (15.4% of LVB’s advances) PSU Banks’ Market Share2: 64.1%


Branch Count

257

7

4

2

12

19

77

47

12

4

2

2

4

4

3

4

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Robust growth across business parameters driven by product and geographic expansion…

0.5 2.3 20

91

141 186

254

0.3 1.4 12

63

103

130

198

1 4

31

154

244

316

452

1980 1990 2000 2010 2012 2014 2016

Deposits AdvancesINR Bn

~85% ~80% Reduced dependence on

Tamil Nadu with declining share in total business

~75% ~65% 50% 49%

144 168

Branches

205 271 290 361 460

Note: Business implies summation of Deposits and Advances

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…backed by a well diversified healthy portfolio moving towards increased retail lending…

Continuous growth across product segments

16,270 19,773 26,395

26,950 34,354

41,706 24,160

24,126

30,656

11,392

13,003

14,180 51,652

73,878

85,252

130,424

165,134

198,189

Mar-14 Mar-15 Mar-16

Retail SME/MSME Rural Mid-Commercial Wholesale

Retail Loans to individuals, HUF, trusts, clubs – irrespective of loan amount

SME/MSME Based on investment in Plant and Machinery, irrespective of loan amount

Rural Based on activity (being classified as Agriculture Direct or Indirect), irrespective of loan amount

Mid-Commercial Loans to sole proprietorship and partnership firms (other than MSME, Rural), irrespective of loan amount

Wholesale All loans not falling in the above 4 categories, irrespective of amount

2 year segment

CAGR 27% 24% 13% 12% 29%

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Implementation of multi function E-lounge , a state-of-the-art branch allowing automated banking

functions such as passbook printing, T+1 cheque clearing etc.

Customer segmentation to fulfil need-based requirements of high-value groups such as HNIs and NRIs

Product bundling to capture larger share of the customer wallet and impose artificial exit barriers

Integrated mobile app encompassing banking functions, instant payee additions, utility payments, mobile

recharges, and wallet advantages

Intuitive and consistent banking interface across channels and devices for seamless integration

Banking on-the-go supported by a secure transaction interface and two-factor authentication

Focussed efforts on improving banking convenience and enhancing customer experience

…and heightened focus on bespoke products for the youth to build esteemed long-term relationships

52% saving bank customers aged 40 or below

100% = 1,390,389

5%

21%

26%

48%

<20 years 20-30 30-40 40+

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WELL DIVERSIFIED MANAGEMENT TEAM BACKED BY RICH FINANCIAL SERVICES EXPERIENCE

18 18

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Experienced management team with diversified experience encompassing various branches of financial services (1/2)

Experience: 33 years

Responsibility: Overall growth and direction of the firm

Past: SBI, Axis Bank

Qualification: Bachelors in Chemistry

Parthasarathi Mukherjee Managing Director and CEO


Responsibility: Overall growth

Past: IDBI Bank

Qualification: Bachelors in Science, Chartered Accountant, Diploma in Management & Financial Services, Certified Associate of Indian Institute of Bankers


Responsibility: Recovery, Legal, Credit, CMD, Treasury, Wholesale Banking, Product Development & Strategy Management, Corporates & Wealth Management

Past: Canara Bank

Qualification: Bachelors in Engineering, CAIIB

Meenakshi Sundaram R.M President, Wholesale Banking

N.S. Venkatesh Executive Director


Responsibility: Operations, Retail Business, HR, IT, NRI Business, and HNI

Past: SBI

Qualification: Bachelors in Science, Masters in Science, CAIIB

Achievements: Launched SBI's Corporate Banking Services in UAE; completed Leadership Development Training organized by Euromoney

Akkidas Jacob Vidya Sagar President, Retail Banking

Experience across multiple dimensions of financials services and banking enables innovative approach to design and delivery of financial products


Responsibility: Head the accounts department and the finance function

Past: Canara Bank

Qualification: Bachelors in Commerce, Chartered Accountant

M. Palaniappan President and CFO

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Experienced management team with diversified experience encompassing various branches of financial services (2/2)


Responsibility: Audit and Inspection, Risk Management and Vigilance

Past: SBI

Qualification: B. Sc., LLB, M.A., CAIIB

Ashok Kumar Pareek SVP, Audit and Inspection, CRO, and CIV


Responsibility: Recovery Department

Qualification: Bachelors in Science, Masters in Science

Nedumaran B. SVP, HR and Admin KEY RECENT HIRE

Madhusudhana Rao V. SVP & Chief Customer Service Officer KEY RECENT HIRE


Responsibility: Banking and Customer Service

Past: SBI

Qualification: Bachelors in Science, Masters in Science, CAIIB, DIB, DBM, DFS


Responsibility: Credit Department

Qualification: Bachelors in Commerce, JAIIB

Kumarappan R.M. SVP, Stressed Assets, Wholesale Banking

Kamalasekaran R. SVP, Credit, Wholesale Banking Group


Responsibility: Cross Selling (TPP) and Business Development

Past: RBS, ABN Amro

Qualification: Bachelors in Science

Peeush Jain SVP, TPP and Transformation, Retail Banking


Responsibility: Integrated Treasury Operations

Past: Bank One (Mauritius), ING Vysya Bank

Qualification: B. Com., Masters in Commerce, CAIIB

Achievements: Awarded 'Best Executive' of the Organization in 2011-2012

Gurumurthy R.K. SVP, Treasury

Padmanabhan Premkumar SVP, Branch Banking (Retail), Operations and IT


Responsibility: Operations and IT

Past: SBI, Punj Lloyd Group

Qualification: Bachelors in Science, Masters in Science, MBA


Responsibility: Retail Credit, Alternate Channels, Marketing and CSR, Financial Inclusion

Past: HDFC, Centurion Bank

Qualification: Bachelors in Science, CA

Shankar A. SVP, SME and Rural Banking, and Retail Lending


Responsibility: Human Resource Development and Administration

Past: SPI Global, ADP, TUV

Qualification: B.E., MHRM, Diploma in HR

Achievements: Certified Executive Coach, Certified PPA & TEIQ Practitioner

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Middle level hiring to strengthen upper tier and pave the path to become a professionally managed financial institution


Responsibility: Liabilities and Product Development

Past: RBS

Qualification: Bachelors in Science

Achievements: Executive Program in Leadership & Management from IIM, Calcutta

Neena Anand VP, Liabilities, Retail Banking


Responsibility: HRD Department

Past: Canara Bank

Qualification: Bachelors in Science, JAIIB

» Experience: 15 years

» Responsibility: Services Department

» Past: HDFC Life Insurance

» Qualification: BBA, MBA, Diploma in Mechanical Engineering

Ramesh S. VP, Services


Responsibility: Regional Office, Coimbatore

Past: Axis Bank

Qualification: Bachelors in Commerce, JAIIB

Sundaram V. VP, IR & Terminal Benefits, HR

Palaniappan M. VP and Regional Head

» Experience: 32 years

» Responsibility: Regional Office, Bangalore

» Past: Axis Bank

» Qualification: Bachelors in Commerce

» Achievements: Certified and Authorized Trainer on Memory Filing Systems and Soft Skills

Yogish K. VP and Regional Head

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Planned extensive hiring at the top for professionally conducted operations

Grade Designation / Posting Portfolio Reporting to

SVP Head – Relationship Management Wholesale Banking President Wholesale

VP NRI and HNI Banking Liabilities and Product

Development

Head – Liabilities and Product

Development

VP Head – Consumer Lending Retail Banking President Retail

VP Head – Operational Risk Risk Department Chief Risk Officer

VP Head – Current Account Liabilities and Product

Development


Development

VP Operational Risk Risk Department Chief Risk Officer

AVP Head – MSME Rural and

Commercial Banking Retail Credit SVP – Retail

AVP Credit Department Credit Department SVP – Credit

AVP Liability and Product Development Liabilities and Product

Development


Development

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Defined verticals for core competency across the organization

MD & CEO

Board

CCSO1

Head, Wholesale

Banking CFO Co. Secy.

Head Strategy

Head, HR Head

Retail Banking DDO2

Head Product & Process Quality

Head, BAU3

ED (3)

Existing Position

Replacement of Existing Position

New Position Created

1 - CCSO – Chief Customer Service Officer; 2 - DDO – Digital Design Officer; 3 - BAU – Business Analytics Unit

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Organization Structure of CASA and Liabilities Department

Head, Liabilities and Product Development

National Sales Head Product Manager,

CASA Savings Account Current Account

Regional Sales Manager, CASA

Sales

ASMs1, Team Leaders, Sales

Executives

CROWN Sales Head

CROWN Relationship

Managers

LBR2/ Corporate Salary

Existing Position

Replacement of Existing Position

New Position Created

1 – ASM – Area Sales Manager; 2 – LBR – Large Business Relationship

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Change in hiring culture to move towards a professionally run new-age bank

4.9%

4.2% 4.0%

3.5% 3.7%

2012 2013 2014 2015 2016

37

34

30

2016 pre hiring 2016 post hiring 2019E

Moving from an emotionally driven to a loyally motivated and professional culture infused financial services organisation

HR

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“Verticalization" of organizational departments

Training in association with

Employee compensation Survey by

HR Function

Change in culture to maintain low attrition rate…

…while reducing average age of the employee

www.lvbank.com

STRATEGIC EMPHASIS ON ENHANCING CASA GROWTH

26

26

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Targeted efforts across geographies to boost low cost CASA deposits

Data as of FY16 unless mentioned otherwise; CASA is daily average CASA balance for the year

1 – CAGR for 4 years from FY16 to FY20

23% 9%

28%

33%

32% 32%

17% 26%

Branch Count Average CASA

Rural Urban Semi-Urban Metro

21% 2%

19% 6%

60%

92%

Branch Count Average CASA

<2 years 2-5 years 5+ years

21,814 26,424

32,212

149,000 21%

22%

[VALUE]1

FY14 FY15 FY16 FY20

CASA YoY Growth

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0% 5% 10% 15% 20% 25% 30% 35%

Branch Percentile

CA

SA P

erc

enti

le

INR Mn

40% of new branches by vintage contribute to 8%

CASA currently, signifying huge potential

Rural branches contribute to 9% CASA implying huge

scope of rural penetration

Robust growth in CASA with strategic efforts

beginning to show results

Emphasis on reducing average CASA concentration

across branches

www.lvbank.com 28

Recent branch expansion and promotions expected to show colour and result in sustained CASA growth

73 78 73

92 96

14.9% 14.5% 14.2%

16.7% 17.4%

2012 2013 2014 2015 2016

Competitive Interest Rates Launched Crown | NRI Banking Product

CASA strategy of high interest rates of 5% and 6% when the market offered 4%

Capitalized on broad base to acquire HNI accounts and build client base to cross sell

Mobile Banking

Launched in 2016; capitalize on cross sell opportunities to existing and new customers

Flexi Current Account Debit Card for Entities

Flexible current account with add-on services like cash pick-up, cash management, and door step banking etc.

One of the first banks to offer debit cards for partnerships and private entities

Robust Sales Force

Doubling feet on street; along with providing training to offer trade and foreign exchange services.

Offline Marketing Digital Marketing

Promotion in print, outdoor media, FM, television, and mobile van campaigns

Official Facebook page created to have a presence on the social networking platform and to channelize customer interaction

Staff Motivation

Online tests for product education for staff; coupled with incentives to market CASA products

SAVING ACCOUNTS

CURRENT ACCOUNTS

ADVERTISING AND PROMOTION

CA, 6%

SA, 11%

TD, 18% Other Retail,

65%

FY16

Backed by a healthy share of low cost Retail deposits Growing CASA Ratio and CASA per branch (INR Mn)

www.lvbank.com 29

Scaled marketing initiatives focussed on broad product portfolio and increased brand recollection

www.lvbank.com 30

Developed core competencies to provide strong impetus to increase CASA and lower cost of funds (1/2)

Transitioning branches to become sales outlets with CASA targets; Multi function E-lounge and service oriented ATMs

Seamless integration of alternate channels for consistent and increased customer experience

Technological architecture upgrade to support larger multi-channel base and maintain customer experience

Implementation of a rewards/loyalty program

Focus on Financial Inclusion keeping in mind unregistered retail and SME sector

Implemented Under

Implementation

Strategic Focus in

Future

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Developed core competencies to provide strong impetus to increase CASA and lower cost of funds (2/2)

Implementation of CRM and analytical customer data mining to increase reach and implement push sales model

Cross-sell offerings and product bundling with increased focus on Third Party Products

Leverage on superior geographic connect with continuing investment in in feet on street to improve brand recall

Customer segmentation with incentivised specialist lending products (Eg. Crown lounges for HNI and NRI)

Affiliations with Government Schemes, Commercial and Institutional segment for larger transaction base

Implemented Under

Implementation

Strategic Focus in

Future

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FOCUS ON FEE BASED PRODUCTS ACROSS CHANNELS TO DRIVE OTHER INCOME

32

32

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Defined targets for Third Party Products to provide fillip to fee-based income from 11% in 2016 to 25% in 2026 (1/2)

Data for FY16 unless mentioned otherwise

Creating exit barriers by providing need-based, bespoke, and high quality bundled and augmented products

Insurance Mutual Funds

Tie ups with insurance behemoths for life, general, and health insurance

Investing opportunities customised for small amounts; developing advisory app with manual intervention for sale of mutual fund products

Credit Cards

Launched as a secured risk free card with plans to gradually transition to own credit card product

New Pension Scheme Money Transfer

Augmented offering focused on corporate salary accounts for management of scheme accounts

Strengthened portal for seamless customer interface and channelization of potential CASA opportunities with augmented footfalls

Forex Travel Cards

High growth high margin exchange rate driven product, irrespective of amounts remitted

Capture larger share of customer wallet through development of a one-stop shop for financial products and services

6,052 Policies sold

40,000 Average case size

70%+ Persistency

8,217 Transactions

5mn Cards targeted for FY17

powered by

1,900 Cards issued from Nov-15 to Mar-16

powered by

197 New policies sold

13 Mutual Fund affiliations

188mn Transacted

www.lvbank.com 34

Defined targets for Third Party Products to provide fillip to fee-based income from 11% in 2016 to 25% in 2026 (2/2)

LIC Products 78%

General Insurance

18%

Mutual Fund 2%

Forex 1%

Health Insurance 1%

NPS 0.1%

LIC Products 52%

General Insurance

37%

Mutual Fund 6%

Forex 5%

NPS 0.1%

11%

25%

2016 2026E

100% = INR 23Mn 100% = INR 62Mn

Fee-based income – FY16 Fee-based income – FY15

Other Income as % of Total Income planned to grow to 25% in 2026

www.lvbank.com 35

Focus on ensuring magnified presence across channels through innovative products and strategic associations

Strong focus on developing ground level visibility across traditional, internet, and mobile channels; backed by data and strategic affiliations

Develop own mobile wallet capabilities integrated with own app to facilitate payments

across channels

Strategic affiliations with other payment apps to facilitate transactional flow

Increasing ATM presence across cities with basic banking facilities of cheque deposit and service

requests; and capture off-us ATM walk-in portfolio

Multi Function E-Lounge | Automated branch for advanced banking facilities such as cheque

deposit with T+1 clearing and passbook printing

Engineering of a Business Intelligence Unit for customer segmentation and decision making

inputs for geographic expansion

Establish own loyalty program to provide the benefits of strategic tie-ups to customers on PoS, E-commerce, Mobile and Net-Banking channels

www.lvbank.com 36

48% 45% 43%

52% 55% 57%

FY13-14 FY14-15 FY15-16

On-Us Off-Us

3,943 4,067

3,988

3,143 3,282

3,216

FY13-14 FY14-15 FY15-16

On-Us Off-Us

Increasing ATM usage by other bank customer presents an untapped segment of walk-in customers for push sales

54% 50% 49%

46% 50% 51%

FY13-14 FY14-15 FY15-16

On-Us Off-Us

INR

With Increasing portion of amount transacted Increase contribution of off-us ATM transactions

With marginal increase in off-us ticket size while

keeping own size consistent

www.lvbank.com

MODIFICATION IN IT ARCHITECTURE TOWARDS AUTOMATION AND ENHANCED CUSTOMER EXPERIENCE

37

37

www.lvbank.com 38

Architectural initiatives to streamline the transaction lifecycle, from sourcing to processing to servicing

CRM Tool Automated Loan Origination Enhanced Banking Platform

Under implementation

Implemented

Order in process for the tool; expected to launch by Mar-17 Key Features: Salesforce Automation and Leads

Management Campaign Management and

Customer Segmentation to ensure mass reachout

Analyse leads and take informed decisions, such as automated responses to FAQs, automated escalation, and fixing service levels based on segmentation

Results: Improve cross-selling and up-selling

capability Drive CASA to targeted levels Improve account balances and

income due to better partner sales management and reduced churn of customers

Fully automated loan origination system to ensure uniform processing through standardized enforcement of credit terms and conditions; integration with credit rating modules, and automatic reporting Tabs to feet on street for instant notifications to Corporate office for commencement of processing Spreadsheet based upload, followed by automatic application of defined business rules and eligibility norms Results Reduced time for data entry Low error rate Higher TAT Improvement in employee

productivity Standardized borrower evaluation Improved document handling

Supreme 2 factor authentication banking channels across internet and mobile App to have user friendly convenient options such as Favourites, Quickpay options, utility payments, and quick telecom recharges etc. App has been launched across iOS, Android, and Windows platforms with a consistent interface across all Digital penetration supported by customer education, marketing and expansion in branch network

Customer Satisfied

Customer LE

AD

S

CU

STO

MER

S

www.lvbank.com 39

Multifunction mobile app with intuitive functioning for a state-of-the-art customer interface (1/2)

Login with PIN or Internet Banking

ID

Information not specific to an account

is available without login

Login Page Landing Page Fund Transfer Page

Smart memorization of previous payment choices exercised – Leading to one-step payment

One step instant payee addition

www.lvbank.com 40

Multifunction mobile app with intuitive functioning for a state-of-the-art customer interface (2/2)

Intuitive one touch drop-and-go options for multiple utilities for enhanced customer experience

www.lvbank.com 41

Implementation of innovative large-scale technological reforms for long-term sustainability

Upgrade Core Banking Suite

Modification of the hardware and network setup to the latest highly scalable technologies and

subsequent upgrade to the core banking and net banking platform

Develop Business Intelligence Unit

Customer segmentation based on analytics and

insight to provide bespoke financials products and services based on differentiated financial needs and

requirements

Enhance Digital Banking and Omnichannel presence

Build strong presence across banking mediums of

online and mobile, for a seamless and uniform customer interface and enhance banking

convenience

Multi Function E-Lounge | Automated service oriented banking lounge for banking services such as passbook printing, cheque deposit with T+1 clearing, cash deposit, and ATM facilities

www.lvbank.com 42

Certified as a frontrunner in technology implementation in the financial services industry

Best bank for managing IT infrastructure among small banks

IDBRT (2014-15)

Excellence In Unified Communications for Business Benefits

Dataquest (2014-15)

NACH Business Technology Award in Small Banks Category NPCI (2013-14)

“CIO 100” in the Networking Pioneer Awards IDG (2012-13)

www.lvbank.com

CUSTOMER SEGMENTED ASSET STRATEGY TO PROVIDE FILLIP TO GROWTH

43

43

www.lvbank.com 44

Customer segmentation to fulfill differentiated customer requirements for effective financial product delivery

Customer Characteristics

Customer Count (#)

Gross Advances (INR Mn)

Retail MSME/Rural/Agri Wholesale

Individuals, HUF, and trusts; with special focus on NRIs

and HNIs

Trading, business and small manufacturing entities as

designated by RBI All business entities

38,233 156,134 630 100% = 26,395 100% = 86,542 100% = 85,252

Well diversified retail advances book with a strong focus on

profitable gold loans, business credit and home loans

Conversion of existing Recap centres to specialized MSME centres for

faster loan processing and reduced Turn Around Time

Emphasis on being a multiple banking partner and channelizing high-rated relationships towards

cross-sell opportunities

Data as on Mar-16

Loan Against

Property 20%

Deposit Loan 16%

Bills Discounted

14% Jewel Loan

12%

Housing Loan 11%

Term Loan 11%

Others 16% Jewel Loan

24%

Business Credit 25%

Cash Credit 17%

Term Loan 11%

Bills Discounted

7%

Loan Against

Property 5%

Others 11%

Term Loan 46%

Business Credit 25%

Deposit Loan 13%

Bills Discounted

11%

Loan Against Property

2%

Others 3%

www.lvbank.com 45

Customer segmentation to fulfil differentiated customer requirements for effective financial product delivery (2/2)

Data as on Mar-16

Well diversified retail advances book with a strong focus on profitable gold loans, business credit and home loans

Customer Characteristics

Gross Advances (INR Bn)

Customer Count (#)

Retail MSME/Rural/Agri Wholesale

38,233 156,134 630

16 20

26


63 71

87


52

74 85


Individuals, HUF, and trusts; with special focus on NRIs and

HNIs

Trading, business and small manufacturing entities as

designated by RBI All business entities

www.lvbank.com 46

Well-defined asset strategy to draw synergies from integrated functioning | Retail

Redefining branches as sales outlets and revamping sales force Internally restructuring branches to function as sales hubs with defined CASA targets with specific focus on HNI and NRI customers

Focus on opening new branches and increasing rural presence

Freeing bandwidth at the branch level by moving the credit appraisal function to the RO/CO level

Doubling feet on street to employ a push sales strategy and capitalise on cross-selling opportunities

Product expansion with focus on innovation Product reengineering by launching bundled products such as LAP, Business Loan, Automobile Loan, Commercial Vehicle loans in affiliation with Ashok Leyland, 2 Wheeler Loan, Loan against time deposits, and loan against securities; and capitalizing them to increasing overall yield and growth in NIM

Focus on value added services such as focussed banking products for family, government employees; and loyalty programs

Focus on moving up the value chain by offering competitive and neighbourhood oriented products

Relationship Management Group Formation of a specialised core relationship management team to channelize the strong and loyal regional customer connect, and pave the way to becoming a one-stop shop for fulfilment of financial needs The main focus of such a team would be to grow inclusively as a competitive and neighbourhood-oriented bank

www.lvbank.com 47

Well-defined asset strategy to draw synergies from integrated functioning | MSME

1 – MUDRA - Micro Units Development and Refinance Agency Bank ; 2 – PMMY - Pradhan Mantri Mudra Yojana; 3 – PMJDY - Pradhan Mantri Jan Dhan Yojna; 4 – CGTMSE - Credit Guarantee Fund Trust For Micro And Small Enterprises

Specialized MSME centres Conversion of existing Recap centres to specialized MSME centres for faster loan processing and reduced TAT Such centres shall be monitored by the Corporate Office as to quality and timelines, ensuring strict adherence to the stipulations of the Credit and Lending Policies of the Bank

Relationship Management Group Formation of a specialised core relationship management team to channelize the strong and loyal regional customer connect, and pave the way to becoming a one-stop shop for fulfilment of financial needs The main focus of such a team would be to grow inclusively as a competitive and neighbourhood-oriented bank

Competitiveness | Matching price to market Rationalizing pricing across the product portfolio and improving lending to Micro Enterprises such as MUDRA1 loans under PMMY2, overdrafts to PMJDY3 beneficiaries, loans eligible for coverage under CGTMSE4, etc.

Customer Deliverance Loan automation under implementation to provide cutting edge in customer deliverance. Product based sales focus from corporate office.

www.lvbank.com 48

51,605 73,873 85,252

512 509

630

FY14 FY15 FY16

Gross Advances (INR Mn) Customer Count (#)

Emphasis on being a multiple banking partner for high quality entities and building a good quality corporate book

Going forward, focus on loan syndication and becoming a co-lender to reputed corporates and minimizing restructured portfolio

Channelize high-rated corporate relationships towards retail products and cross-sell opportunities

Focused asset strategy | Wholesale

6.8% 8.0%

5.8%

FY14 FY15 FY16

Restructured Assets as % of Gross Advances

17%

28%

36%

0 10 20 30

Corporate Count (#)

Fun

ded

Exp

osu

re

Perc

enti

le

with low concentration of funded exposure Steady growth in corporate lending

Wholesale strategy Fall in advances restructured

www.lvbank.com 49

Diversified industry exposure with strong focus on working capital lending

Well distributed industry exposure of advances

book…

…with robust growth experienced in lending for

working capital

100% = 198,189Mn INR Mn

Services, 35%

Agriculture, 15%

Infrastructure, 7%

Textiles, 5%

Metals, 5%

Food Processing, 1%

Chemicals, 1%

Housing and Education Loan,

3%

Deposit Loan, 9%

Others, 19%

38

,51

1

39

,27

0

40

,04

1

44

,31

6

55

,79

6

54

,30

2

59

,28

2

63

,47

1

72

,07

2

91

,86

6

94

,95

4

97

,20

3

99

,91

5

10

9,3

33

11

1,3

26

11

6,4

56

11

8,2

35

12

6,1

17

130,377 134,224 137,243

144,232

165,128 165,629

175,738 181,706

198,189

Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16

Term Loan Working Capital Loan

Data as on Mar-16

0

10

20

30

40

50

60

70

80

90

Mar'15 Mar'16<

Rs.

20

m

Rs.

20

m t

o R

s.5

0m

Rs.

50

m t

o R

s.1

00

m

Rs.

10

0m

to

Rs.

50

0m

Ab

ove

Rs.

50

0m

NA

Breakdown of Advances by ticket size Internal Rating model

67

.9,

40

.9%

78

.6,

39

.6%

38

.2,

23

%

50

, 2

5.2

%

28

.4,

17

.1%

25

.4,

12

.8%

12

.7,

7.7

%

19

.8,

10

%

10

.1,

13

.1%

13

.1,

6.6

%

8.6

, 5

.2%

11

.3,

5.7

%

Rs. in Mn Rs. in Bn

Advances by Rating model and ticket size

50

www.lvbank.com

STRENGTHENING EXISTING ASSET MONITORING AND LENDING POLICY FOR IMPROVED ASSET QUALITY

51

51

www.lvbank.com 52

Significant enhancement in asset quality as a result of cognizant modification in lending decisions

Falling GNPA…

4.2% 4.0%

3.7% 3.4%

2.8% 2.7%

1.9% 1.8% 2.0%


…and reducing NPA

3.4% 3.2%

2.8%

2.4%

1.9% 1.7%

1.0% 0.8%

1.2%


Lowering restructured assets as % to gross advances… …with rising provision coverage ratio

6.8%

7.7%

8.4% 8.9%

8.0% 7.9%

7.5% 7.7%

5.8%


53% 54%

58%

61% 61% 63%

71%

76%

69%


www.lvbank.com 53

Focused efforts on reducing Gross Non Performing Assets

Reducing GNPA exposure over the years

3,852 3,116

2,257

385

515

778

1,099

792 732

129

124 145

5,465

4,546 3,912


Wholesale Retail MSME Rural

With ~60% GNPA from the corporate segment in FY16

Wholesale 57% Retail

20%

MSME 19%

Rural 4%

100% = INR 3,912Mn

Mar-16

www.lvbank.com 54

Top 5 Borrowers

74%

6-10 24%

Others 2%

Diversification of portfolio risk with emphasis on reducing individual and high-risk industry concentration…

Restructured standard assets comprise 4.5% of gross

advances

Restructured NPAs comprise 1.2% of

gross advances

Top 5 Borrowers

48%

6-10 25%

11-15 16%

16-20 8%

Others 3%

100% = INR 8,997Mn 100% = INR 2,419Mn

10 of 630 corporate borrowers contribute to 73% of the restructured standard assets of INR

8,997Mn

10 of 630 corporate borrowers contribute to 98% of the restructured

NPAs of INR 2,419Mn

Low concentration of restructured assets

by industry

With focus on reducing GNPA exposure to high

risk sectors

100% = INR 11,417Mn 100% = INR 3,913Mn Iron 24%

Infrastructure 15%

Metals and Minerals

9% Power

7% Engineering

7%

Food Processing

5%

Other 33%

Metals 16%

Food Processing

13%

Mining, Quarrying

13% Chemicals,

dyes, paints etc. 8%

Textiles 3%

Other 47%

Data as of Mar-16 unless mentioned otherwise

www.lvbank.com 55

…resulting in gradual improvement in asset quality with conscious de-risking of wholesale portfolio

2,6

00

3,8

52

3,1

16

2,2

57

4,3

35

1,2

94

1,6

00

19

0

94

6

76

9

43

4

47

8

81

8

0

38

0

1,2

96

Gro

ss

NP

A F

Y1

3

Slip

pa

ge

s

Up

gra

da

tio

ns

Write

-off

s

Re

co

very

/A

RC

Sa

le

Gro

ss

NP

A F

Y1

4

Slip

pa

ge

s

Up

gra

da

tio

ns

Write

-off

s

Re

co

very

/A

RC

Sa

le

Gro

ss

NP

A F

Y1

5

Slip

pa

ge

s

Up

gra

da

tio

ns

Write

-off

s

Re

co

very

/A

RC

Sa

le

Gro

ss

NP

A F

Y1

6

Reduced slippages with increased recoveries and reduced write-offs signifying results of improvement in asset lending policies

INR Mn

4,546 3,913

11,335

7,484

2,222

2,736

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Mar'15 Mar'16

GNPA Restructured Security Receipts

10.9

7.1

Rs.18,103m Rs.14,133m

The Overall portfolio at risk may be impacted by other standard stressed accounts aggregating to about Rs.6,620m.

GNPA + Restructured + SR has declined to 7.1% as on Mar’16

from 10.9% as on Mar’15

56

Note: If the Proposed sensitivity plays out, the impact is expected to be staggered over a mid term – say 5 years.

Rs. in Mn

Proposed sensitivities to GNPA, restructured and

specific standard accounts as at Mar16

57

www.lvbank.com 58

Revamping Lending Policy to demarcate operations between various business setups

BRANCH SETUP CONVERSION OF RECAPS TO MSME CENTRES

Formation of a separate Retail Lending Group

To be led by a newly hired Head of Consumer Lending

Centralization of handling Wholesale credit to the Corporate Office

Branches to get credit for leads provided to the SME Centres for loans

Existing Recaps to be rechristened as “MSME Centres”

MSME Centres to cater to SME, Agri & Retail lending

Exclusion of lending decision from branches

Branches will have authority to sanction only LADs, JDLs, and LAS, and government sponsored schemes

EXCLUSIVE LENDING GROUP WHOLESALE CREDIT

www.lvbank.com

FINANCIALS

59

59

www.lvbank.com 60

Balance Sheet

(INR Mn) FY11 FY12 FY13 FY14 FY15 FY16

Shareholders Funds 8,924 9,584 10,143 10,536 15,561 17,636

Share Capital 975 975 975 976 1,792 1,795

Reserves and Surplus 7,949 8,608 9,168 9,560 13,770 15,841

Deposits 111,495 141,141 156,190 185,729 219,642 254,310

Current Deposits 8,354 7,221 7,385 9,125 15,099 16,365

Saving Deposits 12,621 13,827 15,241 17,297 21,525 27,791

Term Deposits 90,521 120,093 133,564 159,306 183,018 210,154

Borrowings 7,251 5,800 4,800 4,581 4,581 7,230

Other Liabilities & Provisions 5,341 5,104 5,534 5,685 7,270 8,146

Total 133,012 161,629 176,667 206,531 247,054 287,322

Cash and Bank 10,266 8,467 8,719 13,117 13,187 13,686

Investments 35,189 43,951 43,245 56,887 60,512 65,454

Advances 80,944 101,887 117,028 128,892 163,520 196,437

Secured by tangible assets 66,633 88,383 107,128 121,083 155,222 188,786

Secured by Government 2,282 630 441 200 599 -

Unsecured 12,029 12,874 9,459 7,609 7,700 7,651

Fixed Assets 1,791 1,892 1,898 2,005 2,434 3,670

Others 4,822 5,431 5,776 5,630 7,401 8,074

Total 133,012 161,629 176,667 206,531 247,054 287,322

www.lvbank.com 61

Balance Sheet | Breakdown of Investments


Government Securities 29,696 35,535 38,013 47,741 51,564 58,494

Other approved securities 66 49 - - - -

Shares 139 219 271 388 411 798

Debentures and Bonds 1,797 1,631 1,331 2,654 3,741 3,552

Subsidiaries and JVs - - - - - -

Other 3,491 6,516 3,629 6,104 4,795 2,609

Total 35,189 43,951 43,245 56,887 60,512 65,454

Investments in India 35,189 43,951 43,245 56,887 60,512 65,454

Investments outside India - - - - - -

Total 35,189 43,951 43,245 56,887 60,512 65,454

www.lvbank.com 62

Income Statement


Interest earned 10,648 15,193 17,605 19,840 22,145 25,683

Interest expended 6,998 11,480 13,685 14,979 16,879 19,230

Net Interest Income 3,650 3,712 3,920 4,860 5,266 6,453

Other income 1,370 1,579 1,971 2,036 2,840 3,045

Operating Income 5,020 5,291 5,891 6,896 8,106 9,498

Employee Expenses 1,163 1,412 1,576 1,879 2,384 2,754

Other Operating Expenses 1,119 1,525 1,803 1,927 2,146 2,674

Provisions & Contingencies 1,497 1,094 1,134 2,686 1,802 1,769

Exceptional items - - - - -107 -

Total Expenses 3,779 4,031 4,513 6,492 6,225 7,196

Tax 230 190 462 -193 559 500

Net Profit 1,011 1,070 916 597 1,322 1,802

www.lvbank.com 63

Income Statement | Breakdown of Other Income


Commission, Exchange and Brokerage

718 669 798 836 1,194 1,471

Profit on sale of Investments 84 44 252 205 503 534

Profit on sale of land, Buildings & Other Assets

1 -1 0 0 -3 -1

Profit on Exchange Transactions 110 123 107 143 174 166

Income earned by way of Dividends from Companies in India

6 1 4 4 10 30

Miscellaneous Income 451 743 811 846 963 845

Total 1,370 1,579 1,971 2,036 2,840 3,045

www.lvbank.com 64

Key Financial Metrics

(%) FY12 FY13 FY14 FY15 FY16

CASA 14.9% 14.5% 14.2% 16.7% 17.4%

Yield on Advances 13.6% 13.0% 13.2% 12.8% 12.2%

Cost of Deposits 8.6% 9.0% 8.7% 8.6% 8.2%

NIM 2.9% 2.6% 2.9% 2.7% 2.8%

Yield on Investments 8.1% 8.0% 7.9% 8.1% 8.0%

Credit Deposit Ratio 73.2% 76.1% 70.2% 75.2% 77.9%

Provision Coverage Ratio 61.3% 54.5% 53.2% 60.8% 68.6%

Investment to Deposit Ratio 31.1% 27.7% 30.6% 27.6% 25.7%

Cost/Income Ratio 55.5% 57.4% 55.2% 53.6% 57.1%

Tier-1 Ratio 8.9% 9.2% 7.9% 9.3% 8.7%

Tier-2 Ratio 4.2% 3.2% 3.0% 2.0% 2.0%

Capital Adequacy 13.1% 12.3% 10.9% 11.3% 10.7%

GNPA 3.0% 3.9% 4.2% 2.8% 2.0%

NNPA 1.7% 2.4% 3.4% 1.9% 1.2%

ROA 0.7% 0.5% 0.3% 0.6% 0.7%

ROE 13% 10% 6.2% 10.8% 11.7%

www.lvbank.com

CONTACT US

65

65

The Lakshmi Vilas Bank Ltd. Corporate Office LVB House, 4/1, Sardar Patel Road, Guindy, Chennai - 600032 Tamil Nadu, India Toll Free : 1800-425-2233 Email [email protected]

mailto:[email protected]

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